French giant Veolia cut down to size for abusing Palestinian rights

The French corporation Veolia once appeared unassailable; today it is ailing. It is faced not only with the global economic crisis but also the growing impact of the boycott, divestment and sanctions (BDS) campaign against its involvement with Israeli apartheid infrastructure and transport projects. A recent merger between Veolia’s transport division and a subsidiary of the main French state investment fund indicates French industry and government have united to find a simple solution to Veolia’s problems: let the taxpayers finance Veolia’s income losses — and its complicity with Israeli war crimes and human rights abuses against the Palestinian people.

On 4 August, Veolia management held a conference call with major financial analysts to defend the company’s latest figures. It wasn’t an easy task. Veolia’s management was forced to gloss over the terrible financial situation of the group that has forced it to draw up sharp cost reduction plans, initiate a complete restructuring of management, plan the pullout from more than forty countries and search for more investors to cover a high debt.

Veolia has lost more than 50 percent of its share value since March 2011, according to tear sheet data from The Financial Times (“Marketdata: Veolia Environnement Ve SA,” accessed 25 August 2011).

However, among the underlying financial data discussed — €67 million ($96 million) in net loss during the first half of this year; €15 billion ($21.6 billion) net debts; €250 million ($360 million) yearly cost reduction — one number did not come up: the massive financial damage the company has faced at the hands of the BDS movement. Since the beginning of the Palestinian-led campaign in 2005, Veolia has lost contracts worth more than €10 billion ($14 billion) following high profile campaigns.

Veolia’s chief financial officer Pierre-Antoine Riolacci had to admit that its municipal services are suffering a downturn in some countries “in particular with pressure on the downside, namely in the UK where things are rather difficult.”

The worldwide campaign against Veolia was initiated in response to the company’s five percent stake in the consortium that is constructing the light rail project that links West Jerusalem with illegal Israeli settlements in occupied East Jerusalem and the surrounding West Bank, thereby cementing Israeli colonization and creating the necessary infrastructure for its further expansion. Moreover, Veolia holds a thirty-year contract for the operation of its first line, due to open later this month. Veolia and its subsidiaries also operate bus services, waste management and a landfill all deep within the occupied West Bank, and all for the use of Israeli settlers. All of these projects contribute to war crimes, as defined by the Fourth Geneva Convention and the Rome Statute of the International Criminal Court.

Refusal to withdraw from Israel

Despite its apparent desperation to reduce costs, Veolia has yet to implement the most effective cost reduction strategy it could: including Israel in the list of countries it plans to withdraw from. Rather than divesting from Israeli colonization of Palestinian land, Veolia is turning to the French state for financial assistance, involving public money in operations abetting Israeli war crimes.

Transdev was a subsidiary of the French Caisse des Dépôts (CDC), a public investment authority that manages public funds and is overseen by the French parliament. The CDC is now a 50 percent partner in the newly created Veolia Transdev transport company. According to Veolia’s Pierre-Antoine Riolacci, the entrance of Transdev intp the group has allowed Veolia to “cut back our debt by €159 million [$229 million].” The degree to which Veolia Transdev has come under the protection of the French state is evident in the fact that during the conference call, Veolia Transdev issues were directly dealt with by the CDC’s chief executive Jerome Gallot.

On its website, CDC boasts that it exists to “serve the general interest and the economic development” of France. But pumping French tax money into Veolia to make up for its financial troubles, thus allowing it to push forward projects that serve illegal Israeli population transfers into occupied Palestinian territory, is unlikely to help attain either goal. Moreover, the Jerusalem light rail project contradicts French government policy that East Jerusalem should be the capital of a future Palestinian state. Promoting the project in 2005, then Israeli Prime Minister Ariel Sharon stated, “This [light rail] should be done … to strengthen Jerusalem, construct it, expand it and sustain it for eternity as the capital of the Jewish people and the united capital of the state of Israel.”

Private companies have long been heavily involved in Israeli violations of Palestinian human rights, such as building and maintaining the illegal settlement infrastructure, and the wall built on Israeli-occupied Palestinian land in the West Bank. But by investing in Veolia, the French government is bucking a recent European trend of governments to start ensuring public enterprises and institutions are not complicit with Israeli violations of international law.

The German government recently responded to public pressure by taking steps to end the state-owned company Deutsche Bahn’s involvement in the construction of a train line from Jerusalem to Tel Aviv passing through the occupied West Bank. Explaining its intervention, the German transport ministry pointed to the “potentially illegal” nature of the project and the fact that it is inconsistent with government policy toward Israel and the Palestinians (“Letter from German government to Die Linke parliamentarian concerning A1 train project,” 10 May 2011). The German foreign ministry has admirably published an alert on its website warning German companies about the potential legal consequences of Israeli projects in the occupied West Bank (“West Bank, Economy”).

Precedents set by other European capitals

The Norwegian government took a precedent-setting step when it excluded Elbit Systems from its investment portfolio. Elbit is an Israeli arms company involved in the construction of Israel’s illegal wall in the West Bank. It subsequently also excluded Africa Israel and Danya Cebus, two companies which build illegal Israeli-only settlements in the West Bank (“Norwegian government pension fund excludes more Israeli companies,” 23 August 2010).

The British government also took a stand on the issue when, in 2009, the foreign ministry pulled out of a deal to rent office space for its embassy in a building owned by Lev Leviev, the Israeli diamond tycoon who owns Africa Israel and finances development of illegal settlements in the West Bank. The British government also withdrew export licenses to Israel from UK arms companies that provided the Israeli military with weapons or components that have been used during the winter 2008-09 attacks on the Gaza Strip (“Israel arms licenses revoked by Britain,”The Huffington Post, 13 July 2009).

The French government, however, has so far failed to take action to end such complicity. By doing so, France is not only undermining important precedents set by its allies. It also violates its obligations under international law and the voluntary commitments it has made regarding good governance and corporate social responsibility.

France must honor obligations

When the International Court of Justice ruled on the illegality of Israel’s apartheid wall and related infrastructure in the occupied West Bank, it also ruled that third party states are obliged not to aid or assist the maintenance of the unlawful situation created by Israel or infringements of the right to Palestinian self-determination. Two companies owned by the French state fund CDC — Veolia and Egis Rail — are involved with and profit from such unlawful acts. This calls France’s commitment to international law into question.

According to these principles, “states should take additional steps to protect against human rights abuses by business enterprises that are owned or controlled by the state … [including by] denying access to public support and services for a business enterprise that is involved with gross human rights abuses and refuses to cooperate in addressing the situation.”

Involvement in the light rail project also violates the Organization for Economic Cooperation and Development’s guidelines on multinational companies. Considering that Paris is the seat of the OECD, this is particularly ironic (“OECD Guidelines for Multinational Enterprises,” 2008 [PDF]).

The OECD guidelines call for companies to “respect the human rights of those affected by their activities consistent with the host government’s international obligations and commitments.” Israel’s settlements and associated infrastructure violate several key international law treaties, including the Fourth Geneva Convention, the International Covenant on Economic, Social and Cultural Rights and the International Covenant on Civil and Political Rights, all of which have been ratified by Israel and France.

The French government has become a shareholder in Veolia in full knowledge of that company’s role in supporting Israeli occupation and colonization of Palestinian land. The principal victims of this French policy are the Palestinian people. However, this development should also be of concern to all those who believe in the importance of a functioning system of international law and the implementation of human rights standards. The French people, whose taxes have financed the Veolia Transdev merger, should be especially concerned.

It will be up to campaigners in France and all around the globe to stop governmental buy-ins to illegal operations of private or state enterprises. It will be their task to ensure that the Transdev deal will not be enough to shield Veolia from the impact of the BDS movement’s demand for accountability. The group is in financial trouble and its CFO has admitted that Veoila is losing municipal service contracts in cities and regions that have seen meticulous grassroots campaigning. In December, Veolia will present the full list of countries which it is leaving (“Veolia to leave 37 countries as loss spurs quicker revamp,” Bloomberg, 4 August 2011).

This might be another chance for the company to show that it has learned that failure to respect human rights and the Palestinians’ right to self-determination comes with a price.

Maren Mantovani is coordinator for international relations with Stop the Wall, the Palestinian Grassroots Anti-Apartheid Wall Campaign.

Michael Deas is Europe coordinator for the Palestinian Boycott, Divestment and Sanctions National Committee (BNC).